An Interview with Sam Wilkinson of IMS Research on Changing PV Market Dynamics

Sam Wilkinson is an analyst within the PV group at
IMS Research, and the lead author of several recent reports on various
aspects of the global PV industry. During his time working within the
group, Sam has become a lead analyst in the PV inverter and PV cell and
module markets, working closely with leading global suppliers to develop
detailed research on these markets.

More recently, Sam has been responsible for
establishing primary research reports and benchmarking services for
global system integrators and EPCs, expanding IMS Research’s extensive
coverage of the supply chain further.

Solar Server: In a recent report, IMS
Research stated that it expects the utility-scale PV market to boom in
2011, with First Solar to primarily benefit. With crystalline silicon PV
costs continually falling, do you think that First Solar will be able
to compete with low-cost crystalline silicon PV for the utility-scale PV
market over the long run?

Sam Wilkinson: There are a couple
of things that I need to mention here, first of all. The current outlook
is changing pretty quickly at the moment, due to a number of key
markets changing their demand dynamics and a lot of uncertainty in those
key markets, namely Germany, Italy and France, where the current
incentive schemes are under fire.

We are going to see some pretty major alterations in
those markets, some concerns and some rumored, some will definitely
happen, whilst we have now have a clear view on tariffs in Germany and
France, we don’t yet have a finalized account on what will happen to
Italy’s scheme. Furthermore, it is still very unclear how the market
will react to the cuts in tariffs in Germany schedule for July 1st and whether this will drive increase demand before then.

More recently, the tragic events in Japan have led
many countries to review their nuclear power programs and even now
Germany has announced plans to speed the shutdown of plants. These
events are putting weight behind the case of renewable energy generation
and may help to provide better support for increased subsidies for PV.

So we’re not sure how it will look, it is a little
bit uncertain at the moment, but one key thing to note is that a couple
of the most promising markets long-term are the U.S. and China. We think
those markets are going to be the largest ones in a few years time, and
those markets are where the utility-scale systems are really favored.

Solar Server: Why the U.S.? The nation doesn’t have feed-in tariffs.

Sam Wilkinson: There is a very big
utility-scale drive in the U.S. So, we’re going to get a look at two of
the key players there, namely First Solar and SunPower. And you can see
that just their pipelines alone for utility-scale systems are pretty
significant for the next few years.

And that is just looking at two companies. We see
the utility-scale market in the U.S. being a pretty significant driver
for the global market in the next few years.

In answer to your question about First Solar, we’ve
only got to compare their gross margins to some of their crystalline
competitors to realize that they have got plenty of room to maneuver on
their pricing whenever possible, or whenever required, should I say.

Solar Server: Can you talk a little bit about other leading nations, including China?

Sam Wilkinson: So China again, the
government has made it very clear that they will be supporting solar
power. They’ve also driven the price of systems down so low, I don’t
think we have too much danger of a sudden withdrawal, or an amendment,
or uncontrollable response to a feed-in tariff that we are seeing in
some of the European markets that have led the global market until now.

Solar Server: There has been a lot of talk
about the potential for falling PV module prices in the first quarter of
2011 to leading to an industry shakeout.

Now that we are in the first quarter of
2011, how do you see this playing out? Is this quarter turning out to be
as difficult as some feared?

Sam Wilkinson: Well, IMS Research
for one did forecast that we would have something along these lines, of
what we are currently seeing in Italy, happen. But I don’t think anyone
foresaw exactly what is happening it Italy at the moment. And that has
been a key driver in keeping demand a lot higher than once thought in
the early stages of 2011.

We’re seeing a huge rush to connect systems in order
to benefit from an extremely over-generous feed-in tariff system in
Italy at the moment. And you are well aware of the news there.

The question is really, once the Italian feed-in
tariff is changed, and the same will happen in France, facing a strong
possibility of it happening in Germany, the Czech Republic has
disappeared pretty much off the map altogether. We’re going to see some
emerging markets taking up some of that, but I don’t see how they can
make up for the level of demand that those markets have provided up
until now.

So I think we will perhaps see what happened briefly in Q1 2011 happen later on this year.

Solar Server: As to the predictions of a
shakeout, it appears that, without naming specific companies, some
companies continue to linger despite losses quarter after quarter. Can
you comment on that?

Sam Wilkinson: I always remember,
in an interview with a supplier a few years ago, that he described the
PV market as the land of the living dead. This was during 2009 where
there was a complete crash in the market and many suppliers were in
extremely bad financial condition.

And he commented that “how are all these companies
still alive?” They are wasting away every quarter and have been for many
consecutive quarters.

Obviously different companies have different ways of
coping with that. The PV market is a very optimistic market. There are
lots of people who really look to the future as something very positive,
and they continue to invest with this sort of optimism that the future
is going to bring something better.

Now obviously we are starting to see some movement,
and some sort of ultimate failure to some of these failing companies. I
think we will start to see some consolidation over the next year. As
you’ve mentioned, you don’t want to name names, but some of these
companies have basically coped with this by taking a kind of, “if you
can’t beat them join them” approach, and have taken their production to
Asia.

Solar Server: I note that you recently
returned from the SNEC trade show in Shanghai. Any observations you care
to share with about new developments in Asian PV manufacturing and
markets?

Sam Wilkinson: The key thing that
really hit anyone that traveled over to China for that show that I spoke
to, was just the sheer volume of Chinese module suppliers and cell
suppliers. There are some pretty big question marks over total industry
demand over the next year or so when feed-in tariff changes have taken
effect in Europe.

And really, you have to question whether there is
room for that many module suppliers to be active in the market, with an
increasing part of that market being accounted for by the larger
players.

Solar Server: Anything that we haven’t
talked about regarding the future of the global PV industry that you’d
like to share with our readers?

Sam Wilkinson: No, I think that
from what I’ve just said about Chinese module suppliers, and how the
smaller Chinese module suppliers are competing for a share of the
market, which is gradually being eaten away by the larger tier 1
suppliers, is that we’re seeing some pretty impressive entries into the
market from companies – Taiwanese, and Korean large corporations, in
electronics already – Samsung, LG, Taiwan Semiconductor, AUO, arriving
on the market with a huge amount of capital, and they are going to
pretty quickly reach high volume, low cost production.

And they are going to be a pretty significant challenge for the current players to deal with, I would suggest.